Morning report: Soybeans rebound overnight following yesterday’s losses. (Comments are updated by 7:30 a.m. Central Time.)
*Prices as of 6:50 am CST.
What’s in store for 2023? I stumbled upon this Reuters article this morning that highlights how food inflation is likely to continue into 2023 as global grain and oilseed supplies remain tight and continue to elevate prices. It is fantastic – I highly recommend reading it. I’ve highlighted some of its key points in this morning’s report.
That’s obviously great news for farm country, as it points to another year of bountiful profits. But it’s a bit of a pyrrhic victory. Because consumers are continuing to use higher portions of their paychecks to pay for food bills – and most farmers reading this also have to buy food.’
It also highlights on an important problem that has been driving these tight global supplies – weather issues that have driven production shortfalls.
“The world needs record crops to satisfy demand. In 2023, we absolutely need to do better than this year,” Ole Houe, director of advisory services at agriculture brokerage IKON Commodities in Sydney, told Reuters in the article I mentioned above. “As this stage, it looks highly unlikely, if we look at the global production prospects for cereals and oilseeds.”
Houe cites Australia’s food damage and Argentina’s drought as key drivers of lower wheat crops in the Southern Hemisphere, which will inevitably exacerbate tight wheat stocks in the first half of the 2023 calendar year, or at least until harvest ramps up in the Northern Hemisphere.
The stocks situation is so dire that even expected acreage increases are not likely to overpower expected yield losses due to weather events and soaring input costs. “Planting is higher in several countries but the output is expected to remain subdued due to adverse weather and other factors,” said Ole. “Production is unlikely to be enough to replenish supplies which have been drawn down.”
I’ve mentioned this before in a previous analysis that examined government payments’ role in farm income, but I’ll throw it back out there again: We need to have more open discussions about the role that government assistance plays in farmers’ ability to manage not just the short crops, but the economic headache that accompanies it.
Specifically – is our current Farm Bill designed to adequately handle the growing volume of weather-related disasters experienced by farmers? Or are private insurers expected to pick up the tab for the increasing volume of weather and climate risks? Or have the ad hoc programs enacted in recent years provided an adequate source of risk mitigation to sustain farm profitability?
I don’t have the answers to these musings, but they are important factors to keep in mind – and to make sure your legislators are aware – as a new Farm Bill is debated in 2023. Climate risks are likely to keep growing so next year may be a good opportunity to evaluate the strength of the farm safety net with that systematic issue top of mind.
If you think it is a conversation worth having, make sure you are contacting your legislators about it before deliberations begin for the 2023 Farm Bill.
Corn
Corn prices inched up $0.01-$0.03/bushel this morning, following yesterday’s rally on worries about Ukrainian shipping paces. Markets remain cautious about Ukraine’s ability to continue shipping amid Russian attacks on Ukraine’s energy grid, though ships continued to load through the night.
“Wheat and corn are still seeing support today from the attack on Odesa over the weekend,” Matt Ammermann, StoneX commodity risk manager, told Reuters this morning. “It was a great surprise to the market that a port suffered from the attacks on power systems and this bought back the question of whether Ukrainian grain exports will be disrupted by the fighting.”
“Although Odesa is operating again there is still concern the port may not achieve full operations quickly. Wheat also has background support from forecasts of a cold snap in the U.S. Plains in late December.”
Ukraine’s Odesa port shipped eight grain cargoes overnight following Russian missile strikes in the region over the weekend which cut power to export loading facilities. Odesa was fully closed on Sunday and the other two Black Sea ports that are a part of the Black Sea Grains Initiative, Chornomorsk and Pivdennyi, continue to only operate at partial capacity.
Russian missile strikes have increasingly focused on disabling Ukraine’s energy grid since October, and especially in the aftermath of the extension of the Black Sea Grains Initiative in November. Overnight, Ukraine’s grain traders’ union, UGA, pleaded with the Ukrainian government to ensure adequate energy supplies to storage and exporting facilities, which will help keep a delayed harvest progressing.
Ukraine’s fall harvest has been delayed due to excessive autumn rains, as well as ongoing war conflicts. But the lack of reliable energy could erode the harvested crop’s quality and limit export revenues for Ukraine’s farmers and government.
One storage facility reported temperatures in a corn storage bin at 114.8 degrees Fahrenheit while ventilation systems were inoperable due to the energy grid attacks. “Due to the lack of electricity, it is impossible to cool or ventilate it by moving it. Moreover, such self-heating is dangerous because it can cause an emergency situation at the enterprise,” UGA said in a statement.
UGA estimates that 10 million metric tonnes of grain storage has been lost in Ukraine since Russia’s invasion, so it “cannot afford to lose the harvest that was collected with incredible efforts.”
Soybeans
Bargain buyers lifted the soybean complex this morning after yesterday’s selloff, lifting up U.S. soybean futures $0.06-$0.09/bushel during the overnight trading session. Yesterday’s lower prices were largely driven by bountiful rains across Brazil and Argentina over the weekend. Brazilian ag consultancy AgRural expects that 95% of Brazil’s soybean crop is already planted as of yesterday.
Strong energy prices overnight lifted the soyoil complex, which also added a layer of price support to soybean prices this morning.
“Soybeans are seeing a bargain-buying bounce after Monday’s selloff,” Ammermann said. “Concern remains about dryness in Argentina which is supportive, but soybeans could have more room on the downside if more rain falls in Argentina.”
Wheat
Wheat prices continued to climb higher this morning on accessibility worries in the Black Sea. A weaker dollar also propped up gains this morning. Plus, forecasts for a smaller Russian crop to be harvested next year also kept global supply worries front of mind for the wheat market, especially when considering smaller Australian and Argentine crops this winter. U.S. wheat futures traded $0.08-$0.12/bushel higher this morning on the overarching sentiments.
France’s farm office reported an increase to Fall 2022 soft wheat acreage planted for harvest in 2023 overnight. Harvested acreage for 2023 is now forecast at 11.7 million acres, up 1.7% from this year’s haul. High prices and a robust export market for European Union wheat was a key driver of the acreage uptick in France.
France is the European Union’s largest wheat producer. The E.U. is the world’s second largest wheat exporter, behind Russia.
Speaking of Russia, the Russian agriculture ministry released updated forecasts for its 2023 wheat harvest overnight. Russia is expecting to harvest 2.939 billion – 3.123 billion bushels of wheat next year. It’s a wide range, but even the highest value of these new crop estimates lag behind 2022 (3.343B bu.) and 2020 (3.136B bu.) harvests, which are the current highs based on USDA data.
As the world’s largest wheat exporter, if Russia harvests a smaller wheat crop next year, that will likely not do much to alleviate the tight supply worries at play in global wheat markets that I discussed earlier in this newsletter. So far, the end of high prices and tight supplies is not likely to come in 2023 for wheat markets.
Weather
There is a lot of weather coming at the Heartland over the next couple days, according to NOAA’s short-term forecasts. The system is currently developing across the Upper Rocky Mountains and will send rain, ice, and snow across the Plains and Upper Midwest over the next 24 hours. The Upper Plains and Mississippi River Valley are looking at anywhere between 3-18 inches of snow by Thursday. The Central and Southern Mississippi River Valley should plan for 1-2 inches of rain in the next 24 hours.
The winter storm system is also expected to bring a lot of wind to the Heartland today. It hasn’t started snowing yet here on the Colorado Front Range, but the wind has been blowing quite a bit this morning.
NOAA’s 6-10-day forecasts are trending cooler than usual for most of the continental U.S. through the weekend. Chances for precipitation during that time are leaning above average for the Plains and Upper Midwest.
The temperature trends in the 8-10-day outlook will continue even cooler across the country by late next week. Chances for moisture are likely to remain slightly above to near normal for most of the Northern and Central Plains as well as the Upper Midwest during that time while the Eastern Corn Belt could see below average chances for precipitation.
What else I’m reading this morning on our website, FarmFutures.com:
My latest E-corn-omics column takes a deep dive into all the recent happenings in the fertilizer markets.
Glad tidings for corn and soybeans could bring more good cheer for growers during January, writes Bryce Knorr.
Mike Downey tells the story of a “fair and equal” farm transition that did not accommodate for current market conditions and nearly bankrupted a fifth generation family farm.
Our team’s coverage of Friday’s December 2022 WASDE reports.
Water Street Solutions’ Darren Frye has tips for farmers to recharge, plan, and sharpen management skills during the winter off-season.
Morning Ag Commodity Prices – 12/13/2022
Contract
Units
High
Low
Last
Net Change
% Change
DEC ’22 CORN
$ / BSH
6.425
6.3925
6.4175
0.005
0.08%
MAR ’23 CORN
$ / BSH
6.5725
6.53
6.565
0.025
0.38%
MAY ’23 CORN
$ / BSH
6.57
6.53
6.5625
0.0225
0.34%
JUL ’23 CORN
$ / BSH
6.51
6.475
6.505
0.0225
0.35%
SEP ’23 CORN
$ / BSH
6.115
6.1
6.115
0.0075
0.12%
DEC ’23 CORN
$ / BSH
5.9775
5.9575
5.97
0
0.00%
AR2 ’24 CORN
$ / BSH
6.05
6.04
6.0425
-0.005
-0.08%
AY2 ’24 CORN
$ / BSH
6.075
6.075
6.075
-0.0025
-0.04%
JUL ’24 CORN
$ / BSH
6.0725
6.065
6.065
-0.005
-0.08%
JAN ’23 SOYBEANS
$ / BSH
14.685
14.6075
14.67
0.065
0.45%
MAR ’23 SOYBEANS
$ / BSH
14.735
14.6525
14.7175
0.0625
0.43%
MAY ’23 SOYBEANS
$ / BSH
14.7825
14.7075
14.7675
0.06
0.41%
JUL ’23 SOYBEANS
$ / BSH
14.805
14.7325
14.8
0.06
0.41%
AUG ’23 SOYBEANS
$ / BSH
14.6025
14.56
14.6025
0.065
0.45%
SEP ’23 SOYBEANS
$ / BSH
14.1325
14.075
14.1325
0.065
0.46%
NOV ’23 SOYBEANS
$ / BSH
13.885
13.815
13.8825
0.0525
0.38%
AN2 ’24 SOYBEANS
$ / BSH
13.92
13.855
13.92
0.05
0.36%
AR2 ’24 SOYBEANS
$ / BSH
13.86
#N/A
13.8175
0
0.00%
AY2 ’24 SOYBEANS
$ / BSH
13.83
#N/A
13.8025
0
0.00%
UL2 ’24 SOYBEANS
$ / BSH
13.8425
#N/A
13.8225
0
0.00%
DEC ’22 SOYBEAN OIL
$ / LB
65.42
65.42
65.42
1.03
1.60%
JAN ’23 SOYBEAN OIL
$ / LB
63.14
62.09
62.93
0.73
1.17%
DEC ’22 SOY MEAL
$ / TON
410
#N/A
448.3
0
0.00%
JAN ’23 SOY MEAL
$ / TON
454
450.6
452.9
2.7
0.60%
MAR ’23 SOY MEAL
$ / TON
451.9
448.5
450.8
2.4
0.54%
MAY ’23 SOY MEAL
$ / TON
447.8
444.2
446.5
1.9
0.43%
JUL ’23 SOY MEAL
$ / TON
444.5
441.5
443
1.1
0.25%
DEC ’22 Chicago SRW
$ / BSH
0
#N/A
7.33
0
0.00%
MAR ’23 Chicago SRW
$ / BSH
7.645
7.555
7.6075
0.06
0.79%
MAY ’23 Chicago SRW
$ / BSH
7.7325
7.65
7.7
0.06
0.79%
JUL ’23 Chicago SRW
$ / BSH
7.7625
7.6875
7.745
0.0675
0.88%
SEP ’23 Chicago SRW
$ / BSH
7.8275
7.76
7.81
0.07
0.90%
DEC ’23 Chicago SRW
$ / BSH
7.93
7.8875
7.925
0.08
1.02%
AR2 ’24 Chicago SRW
$ / BSH
7.9725
7.955
7.9725
0.0725
0.92%
DEC ’22 Kansas City HRW
$ / BSH
0
#N/A
8.8
0
0.00%
MAR ’23 Kansas City HRW
$ / BSH
8.735
8.6225
8.6925
0.07
0.81%
MAY ’23 Kansas City HRW
$ / BSH
8.6525
8.5475
8.6225
0.0775
0.91%
JUL ’23 Kansas City HRW
$ / BSH
8.5575
8.4775
8.5475
0.085
1.00%
SEP ’23 Kansas City HRW
$ / BSH
8.555
8.4675
8.555
0.0875
1.03%
DEC ’23 Kansas City HRW
$ / BSH
8.595
8.4975
8.595
0.095
1.12%
AR2 ’24 Kansas City HRW
$ / BSH
8.55
#N/A
8.4575
0
0.00%
DEC ’22 MLPS Spring Wheat
$ / BSH
0
#N/A
9.395
0
0.00%
MAR ’23 MLPS Spring Wheat
$ / BSH
9.26
9.1475
9.245
0.0825
0.90%
MAY ’23 MLPS Spring Wheat
$ / BSH
9.22
9.1175
9.22
0.0875
0.96%
JUL ’23 MLPS Spring Wheat
$ / BSH
9.1775
9.11
9.1775
0.07
0.77%
SEP ’23 MLPS Spring Wheat
$ / BSH
9.0175
8.95
9.0175
0.0675
0.75%
DEC ’23 MLPS Spring Wheat
$ / BSH
9.0475
9.0475
9.0475
0.075
0.84%
AR2 ’24 MLPS Spring Wheat
$ / BSH
0
#N/A
8.95
0
0.00%
DEC ’21 ICE Dollar Index
$
105.085
104.76
104.87
-0.234
-0.22%
JA ’21 Light Crude
$ / BBL
74.54
73.21
73.5
0.33
0.45%
FE ’21 Light Crude
$ / BBL
74.66
73.33
73.6
0.32
0.44%
JAN ’23 ULS Diesel
$ /U GAL
3.0233
2.9503
2.9985
0.03
1.01%
FEB ’23 ULS Diesel
$ /U GAL
2.9913
2.922
2.9683
0.0286
0.97%
JAN ’23 Gasoline
$ /U GAL
2.1305
2.0815
2.0965
0.0155
0.74%
FEB ’23 Gasoline
$ /U GAL
2.14
2.0959
2.112
0.0168
0.80%
JAN ’23 Feeder Cattle
$ / CWT
0
#N/A
183.65
0
0.00%
MAR ’23 Feeder Cattle
$ / CWT
0
#N/A
185.225
0
0.00%
DE ’21 Live Cattle
$ / CWT
0
#N/A
154.4
0
0.00%
FE ’21 Live Cattle
$ / CWT
0
#N/A
156.1
0
0.00%
DEC ’22 Live Hogs
$ / CWT
0
#N/A
81.95
0
0.00%
FEB ’23 Live Hogs
$ / CWT
0
#N/A
83.7
0
0.00%
DEC ’22 Class III Milk
$ / CWT
20.44
#N/A
20.5
0
0.00%
JAN ’23 Class III Milk
$ / CWT
19.05
19.02
19.05
0.01
0.05%
FEB ’23 Class III Milk
$ / CWT
19.13
19.13
19.13
0.01
0.05%
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